Assignment
1. Penna, Identifying types of adjusting entries (page 144)
Match the list of transactions for Penna with the common balance day adjustment:
Employees earned $500 in salary that is now payable.
i. Purchased $200 of office supplies on credit to be used at a later date.
A. Prepaid expenses
B. Unearned revenue( Prepaid Revenue)
C. Depreciation
D. Accrued Revenues
E. Accrued expenses
F. Prepaid expenses(Prepaid Supplies A/C)
ii.Purchased computer for $800. Adjusting for the decline in value after use.
A. Prepaid expenses
B. Unearned revenue( Prepaid Revenue)
C. Depreciation
D. Accrued Revenues
E. Accrued expenses
F. Prepaid expenses(Prepaid Supplies A/C)
iii. Received $2000 from customer for six-month service contract that begins next month.
A. Prepaid expenses
B. Unearned revenue( Prepaid Revenue)
C. Depreciation
D. Accrued Revenues
E. Accrued expenses
F. Prepaid expenses(Prepaid Supplies A/C)
iv. Work performed but not yet invoiced to customer, $600.
A. Prepaid expenses
B. Unearned revenue( Prepaid Revenue)
C. Depreciation
D. Accrued Revenues
E. Accrued expenses
F. Prepaid expenses(Prepaid Supplies A/C)
v. Paid six months of rent in advance, $5400.
A. Prepaid expenses
B. Unearned revenue( Prepaid Revenue)
C. Depreciation
D. Accrued Revenues
E. Accrued expenses
F. Prepaid expenses(Prepaid Supplies A/C)
2. Which of the following statements about accrual and cash-basis accounting is most accurate?
a. Cash-basis accounting records all transactions
b. Accrual accounting records only receivables, payables and depreciation.
c. All the given are true
d. Accrual accounting is superior to cash-basis accounting because it provides more information.
3. Accounting data flow from the:
a. income statement to the statement of changes in equity
b. statement of changes in equity to the balance sheet
c. balance sheet to the income statement
d. both a and b are correct
4. The profit recognition principle says (i.e. the accruals accounting assumption)
a. Record revenue after you received cash.
b. Divide time into annual periods to measure revenue properly.
c. Record profit when revenues are earned and matched against expenses incurred.
d. Cost is the basis of profit
5. Adjusting the accounts is the process of:
a. recording transactions as they occur during the period
b. subtracting expenses from revenues to measure profit or loss
c. zeroing out account balances to prepare for the next period
d. updating the accounts at the end of the period
6. Which types of adjusting entries are natural opposites?
a. prepayments and depreciation
b. expenses and revenues
c. profit and loss
d. prepayments and accruals
7.The Gym (the business) gains a client who prepays $540 for a package of six physical training sessions. The business collects the $540 in advance and will provide the training later. After four training sessions, what should the business report on its income statement?
a. Service revenue of $540
b. Service revenue of $360
c. Cash of $180
d. Unearned service revenue of $360
8. Assume you prepay The Gym for a package of six physical training sessions. Which type of account should you have in your records?
a. Prepaid expense
b. Accrued expense
c. Accrued revenue
d. Unearned revenue
9.Unearned revenue is always:
a. an asset because you have collected cash in advance and do not need to provide any services
b. revenue because you have collected cash in advance
c. owners' equity because you collected the cash in advance
d. a liability because you have only collected cash in advance but have not provided any services
10. The adjusted trial balance shows:
a. revenues and expenses only
b. assets, liabilities and owners' equity only
c. amounts ready for the financial statements
d. amounts that may be out of balance.